The deadline for Canadian shareholders to accept or reject Alexei Mordashov’s takeover terms for High River Gold (HRG) is fixed for next Tuesday, November 27. The latest count to be released to the market suggests he will fail because the holdout shareholders are convinced the offer price is too low. The price point isn’t news. The shareholder count may be.

According to Chris Charlwood, one of the coordinators of the HRG minorities, “we have collected confirmations from shareholders with approximately 90.2 million shares (10.73% of total HRG shares and 43% of the minorities rremaining) that they will not tender to Nord Gold’s offer. This includes shares owned in funds managed by Eric Sprott (HRG’s largest minority shareholder). Nord Gold would have needed 90% of minority to tender to the current offer in order to squeeze the rest out. With 43% of the minority indicating they will not tender, this should prevent this from happening on the Nov. 27th expiry date.”
The latest operating and financial releases from HRG and from the Nord Gold holding company, issued last week, haven’t helped Mordashov’s case. Here is HRG’s report for the third quarter and nine months of the year; and here are Nord Gold’s results. Note that HRG counts in Canadian dollars, while Nord Gold counts in US dollars. The current rate of exchange is C$1 equals US$1.003.

The case against Mordashov’s buy-out is that HRG is worth much more to Nord Gold than Mordashov is willing to pay for, and thus his offer should be rejected until he raises his share price offer. For analysis of the offer and comparative valuations of HRG’s goldmining peers, see this series.

Charlwood’s calculation, circulated to the market this week, subtracts HRG’s performance figures from Nord Gold’s results, to show that without HRG, Nord Gold would be loss-making. “In the first nine months of the year, Nord Gold would have had negative cash flow of $108.2 million, a loss of $13.8 million and a negative cash balance of $10.9 million. The EBITDA [earnings] comparison continues to show the superior performance of HRG’s assets over Nord Gold’s non-HRG assets. The cash flow and profit comparisons highlight the substantial debt that Nord is carrying.”

HRG had a net profit of $137.0 million vs. Nord Gold at $123.2 million – 111% of Nord Gold’s total.

Comparing measures of cash and liquidity equivalents, plus debts on September 30, Mordashov’s holding was significantly weaker and poorer than his takeover target. HRG’s liquidity amounted to $257.7 million, including $89.4 million in shares of Detour Gold; $113.3 million in company loans outstanding to Nord Gold; and $55 million in cash. It owed $10.3 million to one of the partners in the undeveloped Prognoz silvermine joint venture in eastern Siberia. At the same time, Nord Gold is holding $102.4 million in cash, and carrying $523.2 million in accumulated debts.

In Moscow Nord Gold was asked to respond to these calculations and answer the following questions:

— Analysing the 9-month results just released, is it correct to conclude that subtracting the High River Gold (HRG) contribution from Nord Gold’s consolidated figures, Nord Gold would have had negative cash flow of $108.2 million, a loss of $13.8 million, and a negative cash balance of $10.9 million?
— Looking at the earnings (Ebitda) figures, why are the HRG’s assets contributing more to Nord Gold’s earnings than the non-HRG assets?

Diana Asonova, spokesman for Nord Gold, responded: “Considering the circumstances, we have to refrain from commenting.”